Blenheim Closes, Ushering in a New Era in Commodities

Blenheim Closes, Ushering in a New Era in Commodities

Willem Kooyker is folding up his tent at Blenheim Capital, the commodities-focused hedge fund headquartered in an office park in Berkeley Heights, N.J.

Kooyker is a legend. In 1981, he went to work at Commodities Corp., Princeton, N.J., where he was a peer of Paul Tudor Jones, Louis Bacon, and Bruce Kovner. In 1989 Kooyker left the nest to create his own entity, Blenheim, named for the palatial birthplace of his hero, Winston Churchill.

At that time, the futures market for crude was still in its infancy. Kooyker was one of those who appreciated its potential.

A Big and Successful Bet

In 1999, a low point for commodities in general and for crude oil prices in particular, (crude started that year selling at less than $20 a barrel), Kooyker made a big bet that both would bounce back. They did and at that moment crude began a rebound that would take it to above $160 at its peak.

By 2011, three years after that peak, Blenheim Capital was managing more than $9 billion.

But Kooyker was not fated to be one of those elect souls who lay down the tools of their craft at the top. He has ridden the elevator in the other direction in recent years. Specifically, he seems to have underestimated the troubles facing the economy of the People’s Republic of China. China is beset by a falling birth rate, an older workforce, and rising wages. The higher wages are of course good for the wage earners, and good for creating middle-class consumer demand. But they have put China at a disadvantage vis-a-vis the emerging nations, which continue to attract foreign investors with lower labor costs.

China also suffers from regulatory arteriosclerosis, as exemplified by its “zombie” companies, effectively dead but continually subsidized in order to avoid the necessity of a proper burial/liquidation. China is a powerful driver of the world’s commodity markets, both when its demand for imports is high and when that demand slacks off. It has slacked off, and Blenheim paid the price.

This Decade

Early in this decade, Kooyker/Blenheim underestimated the extent of China’s troubles and so underestimated the extent to which they would matter to commodity prices.

As the decade wore on and the miscalculation became obvious, and as crude oil prices again collapsed in the period 2014-2015, big-name investors in Blenheim like the New Zealand public pension fund redeemed. Blenheim’s AUM was down to around $1.5 billion in 2016. Three years later, it is winding down.

Blenheim’s loyalists will not be left homeless. Kooyker’s son, Terence Kooyker, will carry on at Valence Asset Management, and many of Blenheim’s investors have transferred their assets there. Valence’s portfolio manager is James Tatum, and the staff consists of Blenheim alums. Valence is also looking to bring in new investors, with a target AUM of $800 million.

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